The taxation on mesothelioma settlements is quite complex and whether the sum of money you receive following a personal injury lawsuit is taxable will mostly depend on the type of compensation you are awarded. Since the majority of asbestos victims are eligible for general and special damages when it comes to financial compensation, they are not required to pay taxes on the money, as these forms of settlement are always free of tax consequences. In general, the financial help you receive for personal injuries, emotional distress, and medical expenses, as well as the settlement resulting from wrongful death lawsuits, is not taxable. Nevertheless, certain forms of compensation mesothelioma victims might be awarded after a lawsuit are taxable.
Determining Settlement Tax
The old saying about taxes is they’re one thing in life to be certain of. That’s not necessarily true with tax laws and regulations when it comes to lawsuit settlements. To clear up this confusion about what governments might take from a settlement payout, it’s necessary to understand the different types of awards and what they’re specifically made for.
A general rule about taxing settlement awards is that any amounts referring to punitive damage awards are taxable. All other awards paid under personal injury circumstances are not taxable. Then there’s the fuzzy, gray area regarding compensation for loss of income or expected profits with the terms “exceptions” and “limitations” thrown in.
The only thing certain about settlement taxes is this is a complex area. Every person filing a lawsuitin mesothelioma or other asbestos-related illness cases needs representation by an attorney who specializes in this field and knows the tax implications. No one should have to pay more tax than legally required, and an experienced mesothelioma lawyer knows how to negotiate settlements that favor the claimant.
Taxable Compensation Settlements
The basic premise governing American civil lawsuit settlements is that all monies are taxable unless they qualify for specific exemptions. These settlement funds are considered income sources and tax must be paid at a rate proportionate to the recipient’s income bracket. Invariably, a compensation settlement sets the recipient into a much higher bracket and tax percentage on their regular income also rises.
The only tax relief is in how the settlement is structured. Entitled exemptions must clearly identify what payments are for personal injury compensation and what monies are related to punitive damage awards.
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